Costco’s new PBM: It’s all about differentiation

Costco announced in its January 2013 magazine that it would begin offering pharmacy benefit management services, targeting small businesses and highlighting a 200-employee company based in Washington state.

It remains to be seen whether the club retailer’s efforts to compete with the existing PBM businesses of companies like CVS Caremark, Walgreens and Walmart will be successful, and analysts like Citi’s Deborah Weinswig appear skeptical that they will. But whatever the outcome, it’s clear that Costco is looking to compete in a bigger way.

Pharmaceutical industry consultant and author of the blog Drug Channels, Adam Fein, described the current prescription-growth environment as slow. Indeed, the generic wave is resulting in a major commoditization of the drug market, to the point where mass-merchandiser Meijer is even giving away the generic version of Pfizer’s cholesterol drug Lipitor (atorvastatin) for free. Fein also noted that in a PBM industry that is consolidating, winning requires scale or differentiation, and that Costco Health Solutions could build its business with generics.

In such an environment, what will matter for pharmacy retailers is how they differentiate themselves to drive customers to their stores. For many, such as the three biggest drug store chains, this means things like loyalty cards, particularly Rite Aid’s Wellness+ card, which rewards customers for using the pharmacy. But for Costco, as Fein wrote, the new PBM targets self-insured employers that are close to Costco stores; even though the PBM’s network will includes tens of thousands of independent pharmacies, it’ll also make picking up drugs at the local Costco all the more convenient, especially when one considers the club retailer’s existing specialty pharmacy business. In other words, Costco’s PBM may lack the scale of giants like Express Scripts, CVS/Caremark or Catamaran, but it does have the chance to differentiate itself. And Costco has long specialized in catering to small businesses anyway.

Even if some analysts’ skepticism about Costco’s latest move is correct, and it doesn’t gain enough traction or manage to compete with the bigger and more established PBMs, the whole point of being in the retailing business is to drive foot traffic, and if CHS manages to do that, then the club retailer’s foray into the PBM business might just work.

Duane Reade’s ‘Show Us Some Leg’ campaign illustrates power of social media

Duane Reade experienced nearly a 20% boost in sales of its private label hosiery thanks to a seven-week social media campaign dubbed “Show Us Some Leg,” according to a published report.

The important takeaway here is that the success of this campaign speaks to the overall importance of engaging consumers beyond the walls of the bricks-and-mortar store.

As the story states, Duane Reade’s VIP Blogger Team reportedly helped to create more than 10.9 million impressions by encouraging entrants to upload their original photos wearing Duane Reade-brand hosiery via a Duane Reade Facebook page application. That’s 10.9 million impressions that translated into a 20% boost in sales — pretty impressive.

The campaign results are in line with a study released late last year by LoyaltyOne, which found that social media engagement between a consumer and brand drives both immediate and long-term sales increases.

Furthermore, a separate study by RedPrairie, designed to help retailers and manufacturers better understand the shopping habits of Gen Y, found that “successful engagement with millennial consumers is about adding value to their shopping experience, and respecting both their privacy and their preferred methods of communication.”

The reality is that retailers and manufacturers must not underestimate the value of being multichannel and having the capability to connect with the consumer when they are not in the store.

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Shopko appoints Jill Soltau as president

GREEN BAY, Wis. — Mass-merchandise chain Shopko has appointed a new president, the company said Friday.

Shopko announced the promotion of Jill Soltau to president and chief merchandising officer. Soltau began working for Shopko in 2007 as SVP and GMM apparel and accessories, before receiving a promotion in 2009 to EVP and chief merchandising officer. She previously worked for retailers such as Sears and Kohl’s.

In her new role, Soltau will continue to oversee the chain of nearly 350 stores merchandising and product development while assuming responsibility for marketing, e-commerce, inventory management and supply chain departments and continuing her forces on the development and implementation of the company’s merchandising strategy.

"Since joining Shopko, Jill has led the creation of Shopko’s highly successful main store merchandising strategy and has been instrumental in the development of the company’s growth vehicle, Shopko Hometown," Shopko interim CEO and COO Mike Bettiga said. "Jill is a committed, driven and enthusiastic leader."

Pulitzer Prize-winner Peggy Noonan, former Florida Gov. Jeb Bush and singer Diana Ross now feature on the schedule for the National Association of Chain Drug Stores Annual Meeting, slated for April 21-24 in Palm Beach, Fla.

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